The end of the help-to-buy ISA – What’s next?
Since 2015, banks and building societies have been offering help-to-buy ISAs to first-time buyers. To qualify, you had to be 16 or over and be a first-time buyer.
However, as of the end of last month, the scheme has been closed to new savers. Under the scheme savers could deposit a lump sum of up to £1,200 when they opened an account, following this, each month they were able to save up to £200 a month.
The Government then boosted savings by 25 per cent, so for every £200 saved, first-time buyers received a bonus of £50.
The minimum Government bonus is £400; this means you needed to have saved at least £1,600 into your ISA before you can claim your bonus. The maximum Government bonus is £3,000 and to receive that, you needed to have saved £12,000.
To receive the Government bonus, the money must be used to buy a home up to the value of £250,000 outside London, or up to £450,000 in the capital. In addition, this must be your only home, and it can’t be rented out or used as a holiday home.
What happens since its closure on 30 November?
The ISA’s won’t be available to new savers anymore; however, if you opened your account before then, you can keep saving into it until November 2029.
At this stage, your account will close to additional contributions and you must claim your bonus by 1 December 2030.
Although the Help to Buy ISA has ceased for new savers, individuals over the age of 18 will still be able to use the Lifetime ISA (LISA) to purchase a home if they are first-time buyers.
The LISA offers a similar top-up of 25 per cent on a person’s savings when it is used to buy a home worth up to £450,000, but as you can deposit a greater amount over a longer timeframe – £4,000 each year, until you’re 50 – there is the potential to build up a far larger deposit.
The bonus is paid at the end of the tax year in which the money is withdrawn for sale, which may mean that the bonus can contribute directly to the final deposit amount.
The LISA must be used to either purchase a home or withdraw funds when a person is aged 60 or older as part of their retirement fund. Withdrawing the funds for any other reason means that they will not benefit from the bonus.
Link: Help to Buy